EDITION 15

WeeklyNOvEmbEr 2, 2012

Hurricane Sandy: A Shrill Lesson from the L’Aquila Earthquake

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HurriCane Sandy: A Shrill Lesson from the L’Aquila Earthquake

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amgen’S WideSpread reperCuSSionS with Paul Ferrillo

initial publiC offeringS with Alex Lynch

monSter needS to Wake up & Smell tHe Coffee

CommuniCating diffiCult deCiSionS NACD Boardvision

blogS Worth Following

leViCk In the News

CoVer image: In late October 2012 Hurricane Sandy affected at least 24 states in the United States, from Florida to New England, with tropical storm force winds stretching far inland and mountain snows in West Virginia. The cyclone brought a destructive storm surge to New York City on the evening of October 29, flooding numerous streets, tunnels and subway lines in Lower Manhattan and other areas of the city and cutting off electricity in many parts of the city and its suburbs. Extensive damage occurred in New Jersey, especially in the communities along the Jersey Shore.

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ust before Hurricane Sandy struck

New York and New Jersey with full

force on October 29, there was a bit

of mild disagreement among a few

communications and media observers

as to the appropriateness of the public safety

warnings, New Jersey’s in particular.

In retrospect, that “mild disagreement” raises

issues of thunderous importance (pun in-

tended) as it now seems that hundreds of lives,

at least, hung in the balance. It also leads to

an odd but, we’d argue, fairly credible conclu-

sion: that the approach to the looming disaster

by public officials, at least in New Jersey, was

directly conditioned by extraordinary events

in Italy where, just a few days before Sandy,

six scientists and one government official were

sent to jail for not adequately preparing the

population ahead of the L’Aquila earthquake

that killed over 300 people.

On the Sunday afternoon preceding Sandy,

the National Weather Service (NWS) in Mount

Holly, N.J. provided an advisory designed to

spook and shock resistant evacuees. Shouting

in caps, the warning included language that

particularly caught the attention of communi-

cations professionals:

This language went dramatically beyond clear

simple communications. It was more than an

impassioned plea. Consider the use of the word

“remains” to instill a frightening visual impres-

sion, conjuring up disturbing physical images

of what will happen if you don’t comply.

The advisory continued on with powerfully

supportive messages in equally pointed upper-

case language. The storm was expected to

“slam” into the coast. Sandy is “potentially

historic,” injuries are “probably unavoidable,”

and so forth. The NWS concluded with advice

to “err on the side of caution.”

When we first read the warning, it seemed the

NWS was doing just that itself: erring on the

side of caution. As it turned out, there was no

erring about it at all, as the storm turned out to

be at least as bad, probably worse, than ex-

pected. As of this writing, there have been over

50 deaths and the protracted power outage is

back-breaking. (Rumors in New Jersey put full

recovery at up to two weeks.)

Commentators who, just before the storm,

were wondering if “the tone of the service’s

Sunday evening message was completely

appropriate” might reflect on what it really

J

if you are reluctant, think about your loved ones, think about the emergency responders who will be unable to reach you when you make the panicked phone call to be rescued, think about the rescue/recovery teams who will rescue you if you are injured or recover your remains if you do not survive.

Anton Oparin / Shutterstock.com

HurrICANE

Sandy:A Shrill Lesson from the L’Aquila Earthquake

richard S. levick, esq.

Originally Published on Forbes.com

Weekly

06

means to err on the side of caution in all

professional communications. Sometimes

it means being very guarded in tone; some-

times it means being extremely bold. In other

words, caution is not necessarily synonymous

with restraint.

We were particularly struck by one article

praising Mayor Michael Bloomberg for being

rather more congenial about the whole thing

than his counterparts in New Jersey. Bloom-

berg did discharge his duties strongly and

responsibly, likewise warning citizens that fail-

ure to evacuate threatens the lives of the first

responders. At the same time, the article quotes

him as suggesting that people “sit back, have a

sandwich from the fridge, watch television.”

Well, you couldn’t actually have a sandwich

or watch a ballgame in many areas of the city

because there was no power for either fridge

or TV. Bloomberg’s lighter tone certainly did

no harm, as his comments in no way left any-

one less prepared for the torrent to come. But

you do have to hand it to New Jersey Gov. Chris

Christie. The same guy who predicted that the

Denver Presidential debate would change the

dynamics of the race seems to have had the

best gut sense for the kind of communications

that would work most effectively here as well.

Christie is now winning plaudits for his “trade-

mark bluntness and aplomb” in handling the

storm emergency.

It may be a “trademark” approach, but his

strategy could only have been encouraged by

the six-year sentences handed down in Italy

because of “falsely reassuring” statements

before the 2009 L’Aquila earthquake. Close in

lev radin / Shutterstock.com

Anton Oparin / Shutterstock.com

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908

tone to Bloomberg’s attempted insouciance,

Bernardo De Bernardinis, then deputy chief

of Italy’s Civil Protection Department, had

advised residents to go home and have some

wine. “Absolutely a Montepulciano,” he added.

It was, in hindsight, a gratuitous comment that

enraged many Italians and helped convict De

Bernardinis. Were the court sentences fair? I

hardly think so. Did Christie face similar penal-

ties had he been anything less than blunt and

even scarifying? Of course not, but the gover-

nor reads the news. Just a day or two before

Sandy, the Italian debacle had to be, at the very

least, a reminder not to pull a single punch;

again, to err on the side of caution by being as

blustery as possible.

From a communications standpoint, the events

in Italy are all the more pertinent because

those convicted were not convicted for failing

to predict the earthquake. Earthquake predic-

tion is a difficult science to ever get right, as an

international commission on forecasting set up

after L’Aquila reminded us. An earthquake is a

potential “hazard…all the time,” said one com-

mission member.

On the other hand, there were tremors before

the L’Aquila quake. In similar past instances,

residents would typically sleep in their cars,

just to be sure. Here, according to the allega-

tion, the assurances by the scientists directly

led to people deciding it was all right to stay

indoors. The defendants are thus going to jail

for failing to communicate. It’s not reasonable

to have expected those tremors to incite the

kind of dire warnings that Sandy prompted in

New Jersey but something more was obviously

needed in Italy, if only a reminder that it’s not

really worth risking your life just because the

probability of disaster is very low.

Disaster planning is all about risk management

and risk management is often about com-

munications. To be sure, there are significant

lessons for business here, underscored by our

current public preoccupation with transpar-

ency and accountability. When you prepare for

problems, you must calibrate the communica-

tions. Sometimes you need to shout like Chris

Christie. Sometimes a prominent disclaimer

will suffice.

The one thing businesses can be sure of is

that, when there’s any possibility of a disaster

(e.g., product recall, insider trading arrest, you

name it), more than a bottle of Montepulciano

will be needed.

Richard S. Levick, Esq., President and CEO of LEVICK, repre-

sents countries and companies in the highest-stakes global

communications matters—from the Wall Street crisis and the

Gulf oil spill to Guantanamo Bay and the Catholic Church.

L

amgen’S WideSpread reperCuSSionS with paul ferrillo

In this LEVICK Daily video interview, we discuss the class certification issues raised by the Amgen

litigation with Paul Ferrillo, Senior Securities Litigator with Weil Gotshal & Manges, LLP. With

cases such as Amgen and Walmart bringing more clarity to class certification issues, companies

—and especially those in the public sphere—need to carefully consider how they share news

affecting the company and what to say when events don’t transpire as planned.

11

InItIal PublIc OfferIngswith Alex Lynch

Over the next several weeks, LEVICK Daily

will share selected interviews from our

recent NACD Directorship article entitled

“What’s Next? The Top Issues of 2013 and

Beyond.” Today, we feature a discussion

on initial public offerings (IPOs) with Alex

Lynch, a partner in Weil Gotshal’s Capital

Markets Practice.

Mr. Lynch focuses on the representation of

companies, particularly technology, health-

care, financial services, and other growth en-

terprises, as well as leading investment banks

and private equity firms. He has extensive

experience in equity capital markets transac-

tions, with a particular focus on initial public

offerings. He also advises boards on securities

and corporate governance matters.

At the conclusion of the interview, you can

find LEVICK’s own communications best

practices appended.

What is to be learned from the less than stellar IPOs issued by groupon and facebook in recent months? What are the lessons for companies outside the technology sector?

alexander lynch: The primary lessons from

the Groupon and Facebook IPOs are not only

applicable to technology companies but are

applicable to all companies looking to com-

plete an IPO.

First, listen to your advisors. IPO companies

should retain advisors who are experienced in

the IPO process and can help it avoid the many

pitfalls. One of the most common pitfalls is

gun-jumping or marketing the IPO outside of

the typical registration process. Gun-jumping

can delay your offering, result in liability, and

produce bad press during the roadshow. Many

of the gun-jumping issues in the Groupon IPO

could have been avoided if the standard advice

regarding publicity had been followed.

Second, when setting the valuation of the IPO,

leave some room for the stock to appreciate

and be mindful of who is being allocated stock.

Facebook priced its IPO at a rich valuation

and increased the number of shares sold in

the offering. IPO companies need to balance

between trying to maximize the price and the

size of the offering and selecting the right type

of IPO investors and letting those new inves-

tors enjoy some success. A rich valuation and

large deal size can reduce the demand for the

stock in the market after an IPO. In addition,

lev radin / Shutterstock.com

Richard S. Levick, Esq.Originally Published on LEVICK Daily

Weekly

12 13

allocating IPO shares to hedge funds and indi-

vidual investors rather than long-only mutual

funds can result in increased selling pressure

if things don’t go well. Remember, an IPO is not

the last time to the market.

What are the responsibilities of boards of directors in the IPO process?

Alexander Lynch: Directors have a number of

unique responsibilities in the IPO process. First

and foremost, directors have personal liabil-

ity for material misstatements and omissions

in the registration statement and prospectus.

Directors also personally sign the registration

statement. As a result, it is critical for directors

to give themselves the time necessary to read

and review the registration statement carefully

in advance of the initial filing and throughout

the process. They should then compare the dis-

closure to what they know about the business

and alert the IPO company’s advisors of any

disclosure issues.

Second, focus on accounting issues. Is the IPO

company ready to report on a quarterly basis?

Can it produce financial statements on a timely

basis? Are there any accounting policies that

need to be reconsidered? Do you have any ma-

terial weaknesses or significant deficiencies?

If so, how are they being remediated and will

they be remediated in advance of the IPO?

And third, make sure the IPO company is

ready to be public by asking the tough ques-

tions. Do you have the right management team

in place? Why is the IPO company going pub-

lic? Is the business model mature enough to

withstand investor scrutiny? If you don’t have

the right answers to these questions, the IPO

company is likely not ready to be public.

How can boards of directors best pre-pare themselves for the transition from private to public ownership?

Alexander Lynch: Remember, IPOs are the

beginning; not the end. An IPO will not be the

last time the IPO company accesses the mar-

ket. Preparation for life as a public company

is critical for success. Also, a well-executed

IPO provides a substantial amount of goodwill

and positive publicity, while a poorly executed

IPO can damage an IPO company’s reputation

for a long time. Accordingly, preparation by

the board is critical.

Be honest in your assessment of the IPO

company’s readiness to be a public company.

Make sure you have the right management

team in place. Confirm that you have the right

accountants and attorneys. Assess the chal-

The price at which you set your IPO communicates a lot about your value proposition. What happens to that price after the offering communicates even more. Boards need to maintain investor confidence by allowing room for the share price to grow.

The IPO is the beginning, not the end. It is not only a financial event, but a corporate branding opportunity. Boards need to ensure that newly-public companies communicate their value just as aggressively post-IPO as they do in the critical months leading up to it.

Boards need to be ready for circumstances in which high IPO trading volume creates glitches in the system that cost investors’ money and has a negative impact on trust in the system. Companies need to be ready with statements that can forestall chaos and confusion under all anticipated contingencies.

BEST COMMUNICATIONS PRACTICES:

1.

2.

3.

lenges faced by the IPO company and ensure

that they are manageable. Make any necessary

changes to the business, management or advi-

sors before the IPO process to avoid having

to make these changes during the IPO when

public scrutiny is most intense.

In connection with considering an IPO, I

advise boards and management teams to

act like they run a public company before

being public.

Richard S. Levick, Esq., President and CEO of LEVICK, repre-

sents countries and companies in the highest-stakes global

communications matters—from the Wall Street crisis and the

Gulf oil spill to Guantanamo Bay and the Catholic Church.

This post is excerpted from Richard Levick’s recent NACD

Directorship feature “What’s Next? The Top Issues of 2013 and

Beyond.” To read the full article and learn more about the most

significant issues impacting boardrooms today, click here.

L

monSter needs to

Wake up & Smell

tHe Coffeegene grabowski

Originally Published on LEVICK Daily

Weekly

16 17

he U.S. Food and Drug Administra-

tion (FDA) is now investigating five

deaths and one non-lethal heart

attack that have been linked to Monster energy

drinks. The FDA inquiry came after Monster

Beverage Corp. was sued in California Superior

Court by the parents of a 14-year-old Maryland

girl who claim the company’s marquee product

caused their daughter’s cardiac arrest.

The actions are just the latest salvo against

Monster and other energy drink makers whose

products have caused increasing concern

among food and beverage safety advocates.

As the inquiries have grown, we’ve heard little

in response to allegations that consuming con-

centrated amounts of caffeine, sugar, and

other stimulants could have horrible conse-

quences—especially for children. All the while,

the market for these drinks has seemed to

expand exponentially.

Now, however, it seems the safety questions

have reached critical mass. On the day the

Maryland parents announced their lawsuit,

Monster’s share price dropped 16 percent. That

alone is evidence that the radio-silence strategy

simply isn’t going to work anymore. Monster

and others need to stop letting media critics,

concerned parents, lawmakers, regulators, and

plaintiffs’ attorneys tell their story for them.

Even if Monster wins costly court cases, more

are sure to follow unless the company takes

steps to head them off now.

As a start, the company needs to engage its crit-

ics in the digital venues that dominate prod-

uct perceptions today. Right now, Monster’s

website (screenshot left) is extremely dark,

mysterious, foreboding and in many places,

sexually themed. That’s perfect for attracting

the disaffected, rebellious teenagers to whom

the company markets. Unfortunately, about a

third of the visitors to its site now are parents,

lawyers, regulators and aides to crusading

lawmakers. Their prejudices and suspicions

are being reinforced by what they see. As such,

the site needs to consider showing some less-

threatening images and highlighting some posi-

tive information to meet the concerns of these

critical audiences.

At the same time, Monster needs to enlist some

expert support—whether they be food scien-

tists, nutritionists, researchers, or even success-

ful athletes and entertainers—that can attest to

the safety and efficacy of its product. Above all,

the company must repeatedly hammer home

the best fact on its side now: that a can of Mon-

ster contains less caffeine than a Starbucks’

House Venti.

t

Both the third party experts and the most

supportive facts need to be front and center in

company blog posts and during every effort

to engage the digital and traditional media

influencers who are now controlling Monster’s

story online and in the mainstream media.

If Monster tries to ride out a storm this

size without protecting itself better, it will

likely pay a very painful price in brand

damage and litigation costs. Until now, only

teens and 20-somethings were paying atten-

tion to Monster. Now it’s under the scrutiny of

frightened moms and dads, their lawyers, and

the FDA. That should be enough to energize

any company.

Gene Grabowski is an Executive Vice President at LEVICK

and a contributing author to LEVICK Daily.

L

Image public domain. monsterenergy.com

If Monster tries to ride out a storm this size without protecting itself better, it will likely pay a very painful price in brand damage and litigation costs.”

“

blogS worth following

THOugHT leaderSAmber Naslundbrasstackthinking.comAmber Naslund is a coauthor of The Now Revolution. The book discusses the impact of the social web and how businesses need to “adapt to the new era of instantaneous business.

Brian Halliganhubspot.com/company/management/brian-halliganHubSpot CEO and Founder.

Chris BroganChrisbrogan.comChris Brogan is an American author, journalist, marketing consultant, and frequent speaker about social media marketing.

David Meerman Scottdavidmeermanscott.com David Meerman Scott is an American online marketing strategist, and author of several books on marketing, most notably The New Rules of Marketing and PR with over 250,000 copies in print in more than 25 languages.

Guy Kawasakiguykawasaki.comGuy Kawasaki is a Silicon Valley venture capitalist, bestselling author, and Apple Fellow. He was one of the Apple employees originally responsible for marketing the Macintosh in 1984.

Jay Baerjaybaer.comJay Baer is coauthor of, “The Now Revolution: 7 Shifts to Make Your Business Faster, Smarter and More Social.

Rachel Botsmanrachelbotsman.comRachel Botsman is a social innovator who writes, consults and speaks on the power of collaboration and sharing through network technologies.

Seth Godinsethgodin.typepad.com Seth Godin is an American entrepreneur, author and public speaker. Godin popularized the topic of permission marketing.

INDuSTry blogS Holmes Reportholmesreport.comA source of news, knowledge, and career information for public relations professionals.

NACD Blogblog.nacdonline.orgThe National Association of Corporate Directors (NACD) blog provides insight on corporate governanceand leading board practices.

PR Weekprweekus.comPRWeek is a vital part of the PR and communications industries in the US, providing timely news, reviews, profiles, techniques, and ground-breaking research.

PR Daily Newsprdaily.comPR Daily provides public relations professionals, social media specialists and marketing communicators with a daily news feed.

BuSINESS related FastCompanyfastcompany.comFast Company is the world’s leading progressive business media brand, with a unique editorial focus on business, design, and technology.

ForbesForbes.comForbes is a leading source for reliable business news and financial information for the Worlds business leaders.

Mashablemashable.comSocial Media news blog covering cool new websites and social networks.

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naCd boardViSionCommunicating difficult decisions

In this edition of NACD BoardVision, we explore the communications options available to

corporate leaders in this challenging economic environment with Mary Ann Cloyd, a Leader in

the PwC Center for Board Governance, and Peter Gleason, the Managing Director and CFO for

the National Association of Corporate Directors. In an era of belt-tightening across the business

landscape, honesty and transparency are essential to ensuring that difficult decisions are not only

understood, but accepted and eventually embraced by employees, customers, and the full gamut

of corporate stakeholders.

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in tHe neWS

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